ACIT, Circle-2(2), Hyderabad, Hyderabad V. Gayatri Agro Industrial Power Limited, Hyderabad, Hyderabad

CO 2/HYD/2017

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 3240 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 15-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 09-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N RAVI BABU
• Assessee Lawyers: B SAI PRASAD
• Keywords: Reopening of assessment; Audit objection; Tangible material; Assessment record; Tax effect; Reassessment proceedings
• Section: 147; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NOS. 104 & 105/HYD/2015 AND C.O. NOS. 1 & 2/HYD /2017 ASSESSMENT YEARS: 2002-03 & 2003-04 ASST. COMMISSIONER OF INCOME- TAX, CIRCLE 2(2), HYDERABAD. VS. M/S GAYATRI AGRO INDUSTRIAL POWER LTD., HYDERABAD. PAN AABCG4892A (APPELLANT) (RESPONDENT/CROSS OBJECTOR) REVENUE BY : SHRI N. RAVI BABU ASSESSEE BY : SHRI B. SAI PRASAD DATE OF HEARING : 07-11-2017 DATE OF PRONOUNCEMENT : 15-11-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: BOTH THESE APPEALS FILED BY THE REVENUE ARE DIRECT ED AGAINST THE ORDERS OF THE LEARNED COMMISSIONER OF INCOME-TAX(A) - V, HYDERABAD, BOTH, DATED 18/11/2016 FOR AYS 2002-03 AND 2003-04. THE ASSESSEE ALSO FILED C.O.S AGAINST THE SAID ORDERS OF CIT(A). AS THE ISSUE IS IDENTICAL IN BOTH THE APPEALS, THEY WERE CLUBBED AN D HEARD TOGETHER AND, THEREFORE, A COMMON ORDER IS PASSED FOR THE SA KE OF CONVENIENCE. 2. BRIEFLY THE FACTS OF THE CASE, AS TAKEN FROM AY 2002-03, ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF GENERATION A ND DISTRIBUTION OF POWER. FOR THE AY 2002-03, IT HAD ORIGINALLY FILED RETURN OF INCOME ON 25/10/2002 ADMITTING NIL INCOME AFTER CLAIMING DEDU CTION U/S 80IA OF THE ACT. THE SAID RETURN WAS PROCESSED U/S 143(1) O F THE ACT. SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED U/S 147 B Y ISSUING NOTICE U/S 148. THE AO VIDE LETTER DATED 04/02/2008 COMMUNICATED 2 ITA NOS. 104 & 105/H/15 & C.O. NOS. 1 & 2/H/17 M/S GAYATRI AGRO INDUSTRIAL POWER LTD. THE REASONS TO THE ASSESSEE FOR REOPENING THE ASSES SMENT WHICH ARE AS UNDER: WHILE ALLOWING DEDUCTION U/S 80IA THE OTHER INCOME OF RS. 20,08,749/- WAS ALSO CONSIDERED FOR CALCULATING DED UCTION U/S 80IA, WHICH IS NOT CORRECT. SINCE THE INCOME ASSESS ABLE TO TAX HAS ESCAPED ASSESSMENT BY INCORRECT ALLOWANCE OF DE DUCTION U/S 80IA, THE ASSESSMENT IS REOPENED. ACCORDINGLY, ASSESSMENT WAS COMPLETED U/S 144 RWS 1 47 OF THE ACT ON 19/12/2008 BY TREATING THE SAID SUM OF RS. 20,08 ,749/- UNDER THE HEAD INCOME FROM OTHER SOURCES. AO ALSO MADE VARI OUS ADDITIONS. 3. WHEN THE ASSESSEE CARRIED THE MATTER IN APPEAL B EFORE THE CIT(A), THE CIT(A) ALLOWED VARIOUS GROUNDS RAISED B Y THE ASSESSEE INCLUDING THE GROUND OF ADDITION OF RS. 20,08,749/- TREATING THE SAME AS INCOME FROM OTHER SOURCES IN ORDER TO DENY TH E ASSESSEES CLAIM OF DEDUCTION U/S 80IA, WHICH IS THE SUBJECT MATTER OF APPEAL NOW. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL, WHICH ARE COMMON IN BOTH THE APPEALS EXCEPT THE QUANTUM OF ADDITION: 1. THE CIT(A) IS ERRED IN LAW AND ON FACTS. 2. THE CIT(A) OUGHT TO HAVE UPHELD THE DISALLOWANCE OF DEDUCTION U/S.80IA W.R.T. INTEREST INCOME OF RS.20, 08,749/- ON MERITS AS THE INTEREST ON TERM DEPOSITS, IS NOT DER IVED FROM BUSINESS BUT IS TO BE TREATED AS INCOME FROM OTHER SOURCES INSTEAD OF INCOME FROM BUSINESS. 3. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 5. THESE APPEALS WERE DISMISSED BY THIS BENCH DUE T O TAX EFFECT AS PER CIRCULAR NO. 21/2015. SUBSEQUENTLY, DEPARTME NT FILED M.A. NO. 59 & 60/HYD/2016 REQUESTING FOR RECALL OF THE APPEA LS AS THE SAME ARE FALLING UNDER EXCEPTIONAL CATEGORIES OF 8(C) OF THE CIRCULAR NO. 21/2015, CONSEQUENT TO THE REVENUE AUDIT, WHICH WER E ACCEPTED BY THE DEPARTMENT. ACCORDINGLY, THESE APPEALS WERE REC ALLED AND HEARD. 3 ITA NOS. 104 & 105/H/15 & C.O. NOS. 1 & 2/H/17 M/S GAYATRI AGRO INDUSTRIAL POWER LTD. 6. LD. AR SUBMITTED THAT THESE APPEALS WERE RECALLE D DUE TO OBJECTION RAISED BY AUDIT PARTY, THESE APPEALS WERE REOPENED ON THE BEHEST OF ACIT ON 20/11/2007 CONSEQUENT TO THE AUDI T OBJECTION. HE BROUGHT TO OUR NOTICE THE LETTER COPY OF ACIT, DATE D 21/06/2007, IN WHICH, THE AUDIT OBJECTION WAS DISCUSSED AND SUBSEQ UENT TO THAT ON 20/11/2007, ACIT ADVISED THE AO TO REOPEN THE ASSES SMENT AND ACCORDINGLY, AO REOPENED THE ASSESSMENT 21/11/2007, IT IS CLEAR FROM THE ORDER SHEET COPY SUBMITTED BY THE DEPARTMENT. I T SHOWS THAT AO HAS NOT RECORDED THE SATISFACTION APPLYING HIS INDE PENDENT MIND. IN THAT PROCESS, HE RELIED ON THE DECISION OF THE COOR DINATE BENCH OF ITAT, HYDERABAD IN THE CASE OF KEERTI INDUSTRIES LT D. ITA NO. 754/HYD/2015, IN WHICH, THE BENCH HAS DISMISSED THE APPEAL UNDER SIMILAR CIRCUMSTANCES. 7. BASED ON THE ABOVE OBJECTION FROM THE LD. AR, TH E BENCH ASKED FOR THE ASSESSMENT RECORDS AND REPLIES, PROCEEDINGS ON SUCH AUDIT FINDINGS. LD. DR SUBMITTED COPIES OF REPLIES TO THE AUDIT PARTIES AND COPIES OF ORDER SHEET FOR INITIATION OF REASSESSMEN T PROCEEDINGS. 8. LD. DR SUBMITTED THAT THE DEPARTMENT HAS TO FUNC TION BY FOLLOWING INTERNAL PROCEDURES WHENEVER THE AUDIT FI NDINGS ARE FORWARDED, CIT WILL REVIEW THE REPLIES TO THE AUDIT PARTY AND LEGAL ISSUES AND DIRECT THE OFFICERS ACCORDINGLY. BASED O N THE ABOVE PROCEDURES, AO WAS ASKED TO REOPEN THE ASSESSMENT. FURTHER, HE SUBMITTED THAT ANY COGENT MATERIAL CAN BE BROUGHT T O THE NOTICE OF AO, EVEN BY THE AUDIT PARTIES, AO CAN TAKE APPROPRI ATE ACTIONS. HE RELIED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF PVS BEADIES PVT. LTD., 237 ITR 13. HE VEHEMENTLY AR GUED THAT AO HAS IN FACT RECORDED HIS SATISFACTION BEFORE INITIA TING REASSESSMENT PROCEEDINGS AND IT IS PROPER. 4 ITA NOS. 104 & 105/H/15 & C.O. NOS. 1 & 2/H/17 M/S GAYATRI AGRO INDUSTRIAL POWER LTD. 9. LD. AR, AGAIN, OBJECTED TO SUCH REOPENING OF THE ASSESSMENT AND RELIED ON THE DECISION OF THE COORDINATE BENCH IN THE CASE OF KEERTHI INDUSTRIES (SUPRA). 10. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. WE HAVE CONSIDERED VARIOUS LETTERS AND C OMMUNICATION FILED BY THE LD. DR. IT IS CLEAR FROM THE RECORD TH AT AO HAS INITIATED REASSESSMENT PROCEEDINGS ONLY ON THE DIRECTION OF A CIT AND, MOREOVER, AO HAS DEFENDED THE CASE BEFORE AUDIT PAR TIES. IT GIVES AN IMPRESSION THAT AO WAS SATISFIED AND BELIEVED THAT THE ORIGINAL ASSESSMENT WAS PROPER AND THE ASSESSEE HAS MERIT IN ITS CLAIM AS PER THE RETURN OF INCOME. ONLY ON THE BEHEST OF INTERNA L COMMUNICATION AND DIRECTION FROM SUPERIORS, HE HAS INITIATED REAS SESSMENT PROCEEDINGS. IT CLEARLY SHOWS THAT THE AO HAS NOT A PPLIED HIS MIND INDEPENDENTLY TO INITIATE THE PROCEEDINGS U/S 147 A ND NOT RECORDED THE SATISFACTION BEFORE INITIATING THE PROCEEDINGS. WE ARE BOUND BY THE DECISION OF THE COORDINATE BENCHES THAT AO HAS NOT RECORDED PROPER SATISFACTION BEFORE INITIATING PROCEEDINGS U /S 147. ACCORDINGLY, WE FOLLOW THE DECISION IN THE CASE OF KEERTHI INDUS TRIES LTD., (SUPRA) WHEREIN THE COORDINATE BENCH HAS DECIDED THE ISSUE, UNDER SIMILAR CIRCUMSTANCES AS IN THE PRESENT CASE, AS UNDER: 8. CONSIDERING THE SUBMISSIONS OF BOTH THE COUNSEL S AND MATERIAL FACTS ON RECORD, WE FIND THAT THE AO HAD R EOPENED THE ASSESSMENT ON THE GROUND THAT THE WAIVER OF LOAN BY THE BANK HAS ESCAPED ASSESSMENT. THE SAME WAS POINTED OUT IN THE AUDIT OBJECTION. WE HAVE PERUSED THE AUDIT OBJECTIO N AND THE REASONS RECORDED BY THE AO FOR REOPENING THE ASSESS MENT. NO DOUBT, ON RECORD THE REASONS RECORDED BY THE AO ARE BASED ON HIS OWN REASONS OF VIEW, BUT, THE SAME WAS INDULGED ON FINDINGS OF THE AUDIT OBJECTION RAISED BY THE AUDIT PARTY AS IT CAN BE CONSIDERED AS IT WILL FALL IN THE SIMILAR SITUAT ION AS HELD IN THE CASE OF CIT VS. PVS BEADIES (SUPRA). BUT AS THE FIN DINGS RECORDED BY CIT, THE TIMINGS OF THE CORRESPONDENCE OF ADDL. CIT, WHICH IS DATED 13/03/2013 AND TIMINGS OF THE N OTICE U/S 148, WHICH WAS ISSUED ON 26/03/2013 CLEARLY SHOWS T HAT THE REOPENING WAS DONE ON THE BEHEST OF THE ADDL. CIT. IT CLEARLY SHOWS THAT THE AO HAD NOT APPLIED HIS MIND INDEPEND ENTLY EVEN THOUGH THE REASONS RECORDED ON THE BASIS OF THE FAC TUAL ERROR POINTED OUT BY THE AUDIT PARTY. THE REASONS FOR REO PENING AN 5 ITA NOS. 104 & 105/H/15 & C.O. NOS. 1 & 2/H/17 M/S GAYATRI AGRO INDUSTRIAL POWER LTD. ASSESSMENT NEED TO BE BASED ON TANGIBLE MATERIAL WH ICH HAS A LIVE-LINK WITH THE FORMATION OF THE BELIEF THAT THE RE WAS AN ESCAPEMENT OF INCOME. FOR THIS PROPOSITION, CIT REL IED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. KELVINATOR OF INDIA LTD., 320 ITR 561. THEREFORE, W E DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) IN QUASHING TH E REOPENING OF ASSESSMENT MADE BY THE AO U/S 147 OF THE ACT. ACCOR DINGLY, GROUND NO. 2 IS DISMISSED. FOLLOWING THE ABOVE DECISION, WE DISMISS THE APPEAL S FILED BY THE REVENUE. 11. IN THE C.OS., THE ASSESSEE HAS RAISED THE FOLLO WING OBJECTIONS: 1. THE ASSUMPTION OF JURISDICTION U/S 147 BY THE AO IS BAD IN LAW. 2. THE ASSESSMENT WAS ADMITTEDLY REOPENED ON THE BA SIS OF AN AUDIT OBJECTION AND AS PER THE DIRECTIONS OF THE CI T AS STATED IN THE COMMUNICATION IN F.NO. REVIEW/CIT-VI/07-08, DAT ED 19/11/2007 OF THE CIT-VI, HYD. 3. IT IS THUS CLEAR THE AO HAD NOT APPLIED HIS MIND INDEPENDENTLY AND CAME TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME; AND THAT PROVISIONS OF SECTIO N 147 ARE ATTRACTED TO THE CASE. 13. AS WE HAVE DISMISSED THE APPEALS OF THE REVENUE ON VALIDITY OF REASSESSMENT U/S 147, THE GROUNDS RAISED BY THE ASS ESSEE TO OBJECT THE INITIATION OF PROCEEDINGS U/S 147 ON THE BEHEST OF AUDIT OBJECTION, WE HAVE ADJUDICATED IN ITS FAVOUR, ACCORDINGLY, GRO UNDS RAISED BY THE ASSESSEE IN ITS COS ARE ALLOWED. 14. IN THE RESULT, BOTH THE APPEALS OF REVENUE ARE DISMISSED AND THE COS FILE BY THE ASSESSEE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 15 TH NOVEMBER, 2017. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RA HMAN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 15 TH NOVEMBER, 2017. KV 6 ITA NOS. 104 & 105/H/15 & C.O. NOS. 1 & 2/H/17 M/S GAYATRI AGRO INDUSTRIAL POWER LTD. COPY TO:- 1) ACIT, CIRCLE 2(2), 8 TH FLOOR, B, ROOM NO. 824, IT TOWERS, AC GUARDS, HYD 500 004. 2) M/S GAYATRI AGRO INDUSTRIAL POWER LTD., 8-2-348/ 1, F.NO. 102, FLORA APARTMENTS, ROAD NO. 3, BANJARA HILLS, HYD. 3) CIT(A) V, HYDERABAD 4 CIT II, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE